Ms. Kaptur (for
herself and Mr. Jones) introduced the
following bill; which was referred to the Committee on Financial
Services

A BILL

To repeal certain provisions of the Gramm-Leach-Bliley
Act and revive the separation between commercial banking and the securities
business, in the manner provided in the Banking Act of 1933, the so-called
Glass-Steagall Act, and for other purposes.

1.

Short title

This Act may be cited as the
Return to Prudent Banking Act of
2013.

2.

Glass-Steagall
revived

(a)

Wall between
commercial banks and securities activities reestablished

Section 18 of the Federal Deposit Insurance
Act (12 U.S.C. 1828), as amended by section 615(a) of the Dodd-Frank Wall
Street Reform and Consumer Protection Act, is amended by adding at the end the
following new subsection:

(aa)

Limitations on
security affiliations

(1)

Prohibition on
affiliation between insured depository institutions and investment banks or
securities firms

An insured
depository institution may not be or become an affiliate of any broker or
dealer, any investment adviser, any investment company, or any other person
engaged principally in the issue, flotation, underwriting, public sale, or
distribution at wholesale or retail or through syndicate participation of
stocks, bonds, debentures, notes, or other securities.

(2)

Prohibition on
officers, directors and employees of securities firms service on boards of
depository institutions

(A)

In
general

An individual who is
an officer, director, partner, or employee of any broker or dealer, any
investment adviser, any investment company, or any other person engaged
principally in the issue, flotation, underwriting, public sale, or distribution
at wholesale or retail or through syndicate participation of stocks, bonds,
debentures, notes, or other securities may not serve at the same time as an
officer, director, employee, or other institution-affiliated party of any
insured depository institution.

(B)

Exception

Subparagraph (A) shall not apply with
respect to service by any individual which is otherwise prohibited under such
subparagraph if the appropriate Federal banking agency determines, by
regulation with respect to a limited number of cases, that service by such
individual as an officer, director, employee, or other institution-affiliated
party of any insured depository institution would not unduly influence the
investment policies of the depository institution or the advice the institution
provides to customers.

(C)

Termination of
service

Subject to a
determination under subparagraph (B), any individual described in subparagraph
(A) who, as of the date of the enactment of the Return to Prudent Banking Act
of 2013, is serving as an officer, director, employee, or other
institution-affiliated party of any insured depository institution shall
terminate such service as soon as practicable after such date of enactment and
no later than the end of the 60-day period beginning on such date.

(3)

Termination of
existing affiliation

(A)

Orderly
wind-down of existing affiliation

Any affiliation of an insured depository
institution with any broker or dealer, any investment adviser, any investment
company, or any other person, as of the date of the enactment of the Return to
Prudent Banking Act of 2013, which is prohibited under paragraph (1) shall be
terminated as soon as practicable and in any event no later than the end of the
2-year period beginning on such date of enactment.

(B)

Early
termination

The appropriate
Federal banking agency, after opportunity for hearing, may terminate, at any
time, the authority conferred by the preceding subparagraph to continue any
affiliation subject to such subparagraph until the end of the period referred
to in such subparagraph if the agency determines, having due regard for the
purposes of this subsection and the Return to Prudent Banking Act of 2013, that
such action is necessary to prevent undue concentration of resources, decreased
or unfair competition, conflicts of interest, or unsound banking practices and
is in the public interest.

(C)

Extension

Subject to a determination under
subparagraph (B), an appropriate Federal banking agency may extend the 2-year
period referred to in subparagraph (A) from time to time as to any particular
insured depository institution for not more than 6 months at a time, if, in the
judgment of the agency, such an extension would not be detrimental to the
public interest, but no such extensions shall in the aggregate exceed 1
year.

(4)

Definitions

For
purposes of this subsection, the terms broker and
dealer have the same meanings as in section 3(a) of the
Securities Exchange Act of 1934 and the terms investment adviser
and investment company have the meaning given such terms under
the Investment Advisers Act of 1940 and the Investment Company Act of 1940,
respectively.

.

(b)

Prohibition on
banking activities by securities firms clarified

Section 21 of
the Banking Act of 1933 (12 U.S.C. 378) is amended by adding at the end the
following new subsection:

(c)

Business of
receiving deposits

For
purposes of this section, the term business of receiving
deposits includes the establishment and maintenance of any transaction
account (as defined in section 19(b)(1)(C) of the Federal Reserve
Act).

.

(c)

Continued
applicability of ICI vs. Camp

(1)

In
general

The Congress ratifies
the interpretation of the paragraph designated the Seventh of
section 5136 of the Revised Statutes of the United States (12 U.S.C. 24, as
amended by section 16 of the Banking Act of 1933 and subsequent amendments) and
section 21 of the Banking Act of 1933 (12 U.S.C. 378) by the Supreme Court of
the United States in the case of Investment Company Institute v. Camp (401 U.S.
617 et seq. (1971)) with regard to the permissible activities of banks and
securities firms, except to the extent expressly prescribed otherwise by this
section.

(2)

Applicability of
reasoning

The reasoning of
the Supreme Court of the United States in the case referred to in paragraph (1)
with respect to sections 20 and 32 of the Banking Act of 1933 (as in effect
prior to the date of the enactment of the Gramm-Leach-Bliley Act) shall
continue to apply to subsection (aa) of section 18 of the Federal Deposit
Insurance Act (as added by subsection (a) of this section) except to the extent
the scope and application of such subsection as enacted exceed the scope and
application of such sections 20 and 32.

(3)

Limitation on
agency interpretation or judicial construction

No appropriate Federal banking agency, by
regulation, order, interpretation, or other action, and no court within the
United States may construe the paragraph designated the Seventh
of section 5136 of the Revised Statutes of the United States (12 U.S.C. 24, as
amended by section 16 of the Banking Act of 1933 and subsequent amendments),
section 21 of the Banking Act of 1933, or section 18(aa) of the Federal Deposit
Insurance Act more narrowly than the reasoning of the Supreme Court of the
United States in the case of Investment Company Institute v. Camp (401 U.S. 617
et seq. (1971)) as to the construction and the purposes of such
provisions.

In the case of a bank holding company
which, pursuant to the amendments made by paragraph (1), is no longer
authorized to control or be affiliated with any entity that was permissible for
a financial holding company, any affiliation by the bank holding company which
is not permitted for a bank holding company shall be terminated as soon as
practicable and in any event no later than the end of the 2-year period
beginning on such date of enactment.

(B)

Early
termination

The Board of
Governors of the Federal Reserve System, after opportunity for hearing, may
terminate, at any time, the authority conferred by the preceding subparagraph
to continue any affiliation subject to such subparagraph until the end of the
period referred to in such subparagraph if the Board determines, having due
regard to the purposes of this Act, that such action is necessary to prevent
undue concentration of resources, decreased or unfair competition, conflicts of
interest, or unsound banking practices, and is in the public interest.

(C)

Extension

Subject to a determination under
subparagraph (B), the Board of Governors of the Federal Reserve System may
extend the 2-year period referred to in subparagraph (A) above from time to
time as to any particular bank holding company for not more than 6 months at a
time, if, in the judgment of the Board, such an extension would not be
detrimental to the public interest, but no such extensions shall in the
aggregate exceed 1 year.

(3)

Technical and
conforming amendments

(A)

Section 2 of the Bank Holding Company Act
of 1956 (12 U.S.C. 1841) is amended by striking subsection (p).

Section 5136A of the
Revised Statutes of the United States (12 U.S.C. 24a) is amended to read as
follows:

5136A.

[repealed]

.

(2)

Transition

(A)

Orderly
wind-down of existing affiliation

In the case of a national bank which,
pursuant to the amendments made by paragraph (1), is no longer authorized to
control or be affiliated with a financial subsidiary as of the date of the
enactment of this Act, such affiliation shall be terminated as soon as
practicable and in any event no later than the end of the 2-year period
beginning on such date of enactment.

(B)

Early
termination

The Comptroller
of the Currency, after opportunity for hearing, may terminate, at any time, the
authority conferred by the preceding subparagraph to continue any affiliation
subject to such subparagraph until the end of the period referred to in such
subparagraph if the Comptroller determines, having due regard for the purposes
of this Act, that such action is necessary to prevent undue concentration of
resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices and is in the public interest.

(C)

Extension

Subject to a determination under
subparagraph (B), the Comptroller of the Currency may extend the 2-year period
referred to in subparagraph (A) above from time to time as to any particular
national bank for not more than 6 months at a time, if, in the judgment of the
Comptroller, such an extension would not be detrimental to the public interest,
but no such extensions shall in the aggregate exceed 1 year.

(3)

Technical and
conforming amendment

(A)

The 20th
undesignated paragraph of section 9 of the Federal Reserve Act (12 U.S.C. 335)
is amended by striking the last sentence.

by striking
paragraph (6) and all that follows through the end of such subsection.

(f)

Definition of
activities closely related to banking

(1)

In
general

Section 4(c)(8) of the Bank Holding Company Act of 1956
(12 U.S.C. 1843(c)(8)) is amended by striking the day before the date of
the enactment of the Gramm-Leach-Bliley Act and inserting
January 1, 1970.

(2)

Provision
allowing for exceptions after report to the Congress

Subsection
(j) of section 4 of the Bank Holding Company Act of 1956 (12 U.S.C. 1843(j)) is
amended to read as follows:

(j)

Approval for
certain post-1970 subsection (c)(8)
activities

(1)

In
general

Notwithstanding the
limitation of the January 1, 1970, approval deadline in subsection (c)(8), the
Board may determine an activity to be so closely related to banking as to be a
proper incident thereto for purposes of such subsection, subject to the
requirements of this subsection and such terms and conditions as the Board may
require.

(2)

General
standards

In making any
determination under paragraph (1), the Board shall consider whether performance
of the activity by a bank holding company or a subsidiary of such company can
reasonably be expected to result in a violation of section 18(aa) of the
Federal Deposit Insurance Act, section 21 of the Banking Act of 1933, or the
spirit of section 2(c) of the Return to Prudent Banking Act of 2013, and other
possible adverse effects, such as undue concentration of resources, decreased
or unfair competition, conflicts of interests, or unsound banking
practices.

(3)

Report and
wait

No determination of the Board under paragraph (1) may take
effect before the end of the 180-day period beginning on the date by which
notice of the determination has been submitted to both Houses of the Congress
together with a detailed explanation of the activities to which the
determination relates and the basis for the determination, unless before the
end of such period, such activities have been approved by an Act of
Congress.

Section 8(c) of the International Banking Act of 1978
(12 U.S.C. 3106(c)) is amended by striking paragraph (3).

4.

Reports to the
Congress

(a)

Reports
required

Each time the Board
of Governors of the Federal Reserve System, the Comptroller of the Currency, or
another appropriate Federal banking agency makes a determination or an
extension under subparagraph (B) or (C) of paragraph (2) or (3) of section
18(aa) of the Federal Deposit Insurance Act (as added by section 2(a)) or
subparagraph (B) or (C) of subsection (a)(2) or (b)(2) of section 3, as the
case may be, the Board, Comptroller, or agency shall promptly submit a report
of such determination or extension to the Congress.

(b)

Contents

Each
report submitted to the Congress under subsection (a) shall contain a detailed
description of the basis for the determination or extension.